SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) are tax incentive programs in the United Kingdom designed to encourage investment in early-stage and high-growth companies.
SEIS provides tax benefits to individual investors who invest in qualifying startups. Investors can receive income tax relief of up to 50% of their investment, subject to certain conditions. Additionally, capital gains made from the sale of SEIS-eligible investments are exempt from tax.
EIS operates similarly to SEIS but is targeted at larger companies. It offers income tax relief of up to 30% and capital gains tax exemptions. EIS also allows investors to defer capital gains tax liability by reinvesting gains into qualifying EIS investments.
Both SEIS and EIS aim to support the growth of innovative and high-potential businesses by providing tax incentives to investors. These schemes play a crucial role in attracting funding and promoting entrepreneurship in the UK.
Note: If you don’t qualify for S/EIS it will make your job of raising money from UK Angel Investors (HNW’s) much harder.
Advance Assurances is HMRC’s was of assessing if your startup (or company) qualifies for the S/EIS tax benefit. You will need to submit various documentation in order from them to conduct an assessment. If you are successful they will issue with and Advance Assurances certificate that you can present to investors who may be able to take advantage of this incentive.
Note: Only UK investors who pay individual personal tax in the UK can take advantage for S/EIS advantages. Companies, VC’s and Angels tax domiciled outside of the UK wont be able to use these benefits.
The final point to mention is that S/EIS is one of the best incentives globally for individuals to invest in startups. It has had a dramatic influence on the UK investment landscape and makes it much easier for UK startups to raise money. This incentive also means that the seed market is primarily dominated by individual angel investors, with venture capitalists (VCs) only entering the picture at the series A stage.